For several years, the Justice Department and U.S. taxing authorities have been working aggressively to implement the Foreign Account Tax Compliance Act, or FATCA. For the individual taxpayer who owns or has signatory authority over certain foreign assets or bank accounts, FATCA requires disclosure of those assets and accounts to the IRS. The idea is to stop U.S. taxpayers from hiding their assets in offshore "tax havens" in countries that don't share such information with the IRS directly.
Of course, the IRS would find it much easier to prevent U.S. taxpayers from concealing accounts abroad if foreign banks were willing to turn over all the information they have. Because the United States doesn't naturally have the authority to force foreign banks to cooperate, it has worked hard over the past few years to force them to do so via treaties with their home governments.
With Swiss banks being known worldwide for their strict privacy principles, it may not surprise you to hear that the U.S. government set its sights on Credit Suisse as a probable location of undisclosed offshore accounts held by Americans. Accusations are one thing, of course; a guilty plea is entirely another.
In May, Credit Suisse admitted that it helped Americans hide taxable money in its vaults. On Friday, the multinational financial services group entered a guilty plea and agreed to a whopping $1.8 billion penalty -- $1.14 billion in criminal fines and almost $667 million directly to the IRS.
The hearing on Friday was short -- merely 25 minutes or so -- and Credit Suisse's attorneys had little to say. A spokesperson explained that the bank has "worked closely with the U.S. Department of Justice to conclude this matter, and having it fully resolved is an important step forward for us."
Despite the seemingly quick resolution of the charges, Credit Suisse is not out of the woods yet. The multinational holds investments for some American retirement funds, and a guilty plea may make the bank ineligible to continue doing so. A hearing before the U.S. Department of Labor on the subject has been scheduled for January.
Source: Chicago Tribune, "Credit Suisse ordered to pay $1.8 billion for helping Americans avoid taxes," Gary Robertson, Reuters, Nov. 21, 2014